Tue, 10 May 2005

The Chenango
Canal connected Utica and Binghampton in New York State from 1837
to 1878. The Canal was first seriously proposed in 1826. It was
thought even then that a role of government was to help businesses, so
the promoters of the Canal introduced a bill in the New York State
legislature for seven years, until in 1833 the amount of $1,000,000
was authorized for the building of the canal.

The frequent reader of this blog will not be surprised to find that
the canal cost over $2,500,000 to complete. Moreover, counting the
cost of operation, interest on the bonds, plus a failed bid to extend
the canal by 33 miles, the total cost of the Canal was $6,871,209.
The total amount returned in tolls? $744,021. The difference of
$6,127,188 had to be made up by state revenues from the Erie Canal.

The Canal lost money. It lost a lot of money. Were it
run by a private company, everyone would of course say that this was a
disaster. Because it was run by the State of New York, some people
try to dismiss any need for profit. They will tell you "governments
are not supposed to make a profit." or "It's the government's job to
invest in things that won't turn a profit." This is foolishness,
though.

Resources are limited; even and especially government resources.
So what should a government spend its citizens money on? Why, those
things that create the most benefit, of course. And how do you
measure that benefit? Why, by profit, of course. The trouble is that
governments forget this. They listen to the promoters of projects,
and they believe the wild-eyed description of the potential benefits.
For the Chenango Canal, it was all the businesses that would spring up
along the route of the canal, exploiting the resources of the region,
bringing coal from the hills into the city.

This is not a history lesson, of course. Governments still work
the same way, foolishly believing the inflated benefits of this
project or that project. In my own part of New York State, there is
no four-lane limited access highway. This, we are promised, is what
is holding back development of the North Country. "Build it and they
will come" I actually heard the Jefferson County economic developer
say. Listen
to the story for yourself.

What keeps them making these mistakes is support from citizens who
think these unproductive investments are good. When your government
wants to spend money, say "No thanks! I know better how to spend my
own money."